Job creation? We actually need to start talking 'wealth creation'

"Job creation" has been the mantra in overdrive since the great bank heist of 2008. It sounded reasonable since the resulting unemployment rates were sky high and for many demographics and in many regions still are. This isn't just spewed out of the mouths of politicians and bankers, but the people too. Often you'll hear "politician x needs to do more for job creation", etc, etc.

But much of the jobs that have been created since 2008 are service jobs, part time jobs, temporary jobs, and perhaps most importantly most of them revolve around the consumption and not the creation of wealth. We tell ourselves that jobs unto themselves and the jobless rate provide insight into the level of economic health. "There are no bad jobs".

This focus on job creation over wealth creation is part of the illusion of economic recovery. It's what allows the likes of Mitt Romney to say that money should be cheap and corporate taxes should be low so that the wealthy can employ people. The focus is on empowering the wealthy to meagerly employ the people rather than empower the people to become the wealthy.

Today I came across a great piece about the 'boom and bust cycle'. It's nothing I didn't already know but it sums up an important companion to my blog post here which I have been wanting to write for a long time about the difference in job creation and wealth creation to follow up my post on inflation vs. devaluation. You really should read the entire piece on boom and bust but I will quote the relevant section here.

As always, they will overexploit the power. They will manufacture money and give it to the masters that coercively secure the continuation of the power. The masters will obviously spend the money, creating a transaction in which nothing is payment for something. These transactions are by definition unsustainable because they violates Say`s law. We call them “bubbles”

In a free market supply is used to create its own demand. When people spend fiat money they exercise demand without providing supply. Said in other words, spending fiat money is tantamount to capital consumption and makes society poorer.

While the boom that follows money spending feels good, it must inevitably come to an end because the economic system cannot maintain the constellation that was induced by the money printing in the first place. Within the boom lays the seed for the necessary bust.

We have made a metric that sums up fiat money in its purest sense and compared that to the underlying trend growth of nominal GDC.

Our hypothesis is simple: if money growth exceeds the GDC metric a deflationary busts will inevitably come. If authorities refuse to accept reality and print more fiat money at the first sign of bust, they may “save the day” but they will “ruin tomorrow”!

Why are central banks keeping rates so low? To spur lending which is supposedly supposed to lead to hiring. Hiring into what though? If you look at Greece the most available job is to become enrolled into their ever growing police force used to suppress the many, many, riots and protests they've had over their failing economy. The police positions are "jobs" paid out of government debt which produce absolutely nothing and provide next to nothing except to slow the inevitable degradation of Greek society. The Greek government is actually "creating jobs" as a direct result of depleting wealth. This is to say that they are expanding their currency base without proportionate increases in the wealth being created and this can only lead to devaluation of the currency (which is diluted across the Eurozone).

Jobs for the sake of jobs will not propel a real economic recovery. All it does is distribute an ever-diminishing amount of buying power across the population as a whole. Every transaction is an exchange of energy and in every transaction someone is getting ripped off or there wouldn't be profit at all. Profit when no new wealth is being created is simply an excessive transfer of energy from one party to another one of which who afterwards will have less energy to their name than the other guy did before the transaction. With a monetary supply expanding faster than new wealth can be generated at the bottom, the wealth that currency represents is future - yet to be produced (and no guarantee it will ever be produced) - wealth.

If profit is being made at the top, with "job creation" focusing on service to facilitate the consumption and transference of that wealth on the assumption that someday, somehow, there will be new replacement wealth in the future then guess what happens to all the jobs created when inevitably our flawed assumption of future wealth proves false?

My guess is a severe shortage in buying power to consume with which of course is going to put a damper on the demand for service and consumption. As the boom and bust post closed with...

"There is no means of avoiding a final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion or later as a final and total catastrophe of the currency system involved."

- Ludwig von Mises

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Richard Fantin is a self-taught software developer who has mostly throughout his career focused on financial applications and high frequency trading. He currently works for CenturyLink

Nazayh Zanidean is a Project Coordinator for a mid-sized construction contractor in Calgary, Alberta. He enjoys writing as a hobby on topics that include foreign policy, international human rights, security and systemic media bias.

Maybe one day...

Well now that the confidence in bad economic data is high it's time to tell everyone how we're really doing. Remember how growth was supposed to return in 2013, and then 2014, well now it's 2015. Expect there to be a new projection next year of 2016 after confidence is built up and projections slashed yet again.

Where will all of our illusionary growth in 2015 be coming from? Will it be coming from the U.S.?

The health of the U.S. economy has always been important for Canada’s economic wellbeing. But with Canada’s consumer tapped out and its governments tightening their belts, the elephant south of the border will have to do even more of the heavy lifting than usual to keep Canada’s economy on track, to adapt Pierre Elliott Trudeau’s observation to an economic context.

The stakes are high; a stronger U.S. economy could absorb more Canadian exports, helping lift the economy out of the morass of sub-par growth that’s characterized the last two years or so.

I wouldn't count on them whether you're using jobs as an indicator or the FED or oil price, and with the way their foreign debt holdings are going you can expect that the next time the "fiscal cliff" pops up in it's calculated fashion the results will again be worse which will pretty well ensure that Canada's future growth isn't going to be coming from the U.S.

How about Europe with the new CETA deal? Well that is certainly going to help the TFW farce and Europe is obviously quite happy about that.

The European Union is touting the fact a landmark trade deal with Canada will make it easier for EU companies to move staff here for short-term postings – a development that comes as the Canadian government tries to dissuade employers from importing temporary foreign workers.

So expect a lot more of this:

As hundreds of pipefitters and welders arrived at Husky Energy’s Sunrise project for their weeks-long shifts, a company spokesperson told the crew of approximately 270 this would be their last.

Their replacements?

An equal number of temporary foreign workers brought in by Saipem, a non-union Italian company specializing in oil and gas construction projects.

But hey, don't say I didn't warn you all. Of course this is in addition to secret international courts overruling the people's governments in the name of trade as is standard with all "free trade" deals.

So how about China? Surely those emerging markets will be the source of Canada's growth?

China’s battle against a persistent air pollution crisis, which all but shut down a city of 11 million this week, is being hampered by tough weather conditions, an environmental official said on Tuesday.

Air quality in cities is of increasing concern to China’s stability-obsessed leaders, anxious to douse potential unrest as a more affluent urban population turns against a growth-at-all-costs economic model that has affected much of the country’s air, water and soil.

I'm looking forward to those "rate hikes" in 2015, aren't you? Maybe it's time Canada starts looking to Canada and Canadians for it's future prosperity instead of economic blocs that can't even manage their debt under a police state enforced austerity. Or maybe the federal government already knows prosperity isn't going to be happening and it's growth projections are bullshit and that central banks won't be able to keep printing money forever to keep the economy on life support. Maybe they already know future obligations are not going to be serviced and are preparing for a day when our "essential services" worker's pay will have to be furloughed as in the U.S. recently. Maybe next year we'll finally get some honesty about the non-recovery, peak oil, the real global consequences Fukushima, and the real prospects for "growth" - though I wouldn't count on it.

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Richard Fantin is a self-taught software developer who has mostly throughout his career focused on financial applications and high frequency trading. He currently works for CenturyLink

Nazayh Zanidean is a Project Coordinator for a mid-sized construction contractor in Calgary, Alberta. He enjoys writing as a hobby on topics that include foreign policy, international human rights, security and systemic media bias.

U.S. Debt: Never say never

You know, back before the 2008 crisis began there was a lot of talk about how it would "never" happen. That the subprime housing bubble would never pop. Yet despite all of the optimistic and sure as shit outlooks, it did happen. We're still dealing with the fallout today and that was only a partial collapse. You'd think by now the world would have learned to never say never especially when it comes to the corrupt monstrosity referred to as the economy.

Over the last few years though with the continual bombardment of cliffs and edges and wires and stimulus and bailouts a new confidence has arisen; a confidence that no matter how bad things get there is always one more emergency measure to put in place to stop everything from falling apart.

I came across a post today by a fellow Canadian blogger who states that a default by the U.S. will never happen. I don't normally like commenting on other blogs as I prefer to save my criticism for officials or bad journalism but the argument he lays out for why the U.S. will never default is rooted in exactly the sort of false confidence in emergency measures I've been talking about.

I will reproduce his post here for the purpose of commenting paragraph by paragraph.

The United States will not default...

There is a lot of nervousness and anxiety out there, particularly in the capital markets over the US government shut down for one, but more so over the prospect that by failing to increase their debt ceiling the United States might default on some of its obligations.

"Might" implies they have a choice in the matter which in the case that the debt ceiling is not raised and barring any desperate emergency measures by the U.S. treasury (we'll get to these in a bit) there is no choice in the matter.

Well, it ain't gonna happen.

This time. But as I said in my post yesterday, what about next time? and the time after that? The results and the measures taken after each "debt crisis" over the last few years have gotten progressively worse, not better.

For arguments sake, if the US were to default the consequences would be nothing short of disastrous, not just for Americans, but for the entire world. US government debt instruments are close to the gold standard when it comes to investments sought for safety during times of uncertainty. If Washington stops paying its bills, the Great Financial Crisis of 2008 will look like a day at Disney Land as capital markets freeze with no hope of help from the government of the world's largest economy.

This paragraph is almost completely correct, though I definitely have to take issue with "US government debt instruments are close to the gold standard when it comes to investments sought for safety during times of uncertainty". This does not hold true when the uncertainty revolves directly around U.S. debt. There is no gold standard anymore, the U.S. debt dollar replaced it, though perhaps what the author meant to say was "gold" as the gold standard doesn't apply to his sentence. In any case the usage of it is somewhat ironic since U.S. debt did replace the gold standard with the USD becoming the defacto world reserve currency. Which brings us to our next portion...

That is why it won't happen.

Bad things won't happen because they would be bad. Well 2008 wasn't supposed to happen either, and that was bad, wasn't it?

Does that mean the fight going on between Tea Party factions and Democrats supported by moderate Republicans is without meaning? Far from it. Tea Party types are adamant about derailing health care reform. In doing so they are providing a big boost to advocates of the status quo. The fact is the US has the most expensive health care system in the world, and while millions of Americans have no coverage (including children) the health care industry is doing just fine at making profits. 

What's lost in the muck of the theater battle over 'Obamacare' (which we will get to in a moment) is the reason why the U.S. can simply raise it's debt ceiling to avoid default. The reason why is that the USD is the world's reserve currency this means that the U.S. can print said currency, trade it for real goods (namely oil) with any country in the world, and everything is hunky dory. However, assuming this relationship is permanent and forever is a huge mistake. Countries like China and Russia have already started trading oil in alternative currencies. The BRIC nations are attempting to create a new gold backed currency basket to compete with the U.S. dollar and IMF. Nations like Iraq and Libya found themselves the target of U.S. military strikes and in the case of Iraq an invasion after declaring they would no longer accept USD for oil. The long and short of it is that the U.S. can print all the money it wants but at the end of the day there must be countries willing to accept it for real goods. Food, energy, etc. You can't eat a dollar bill and the U.S. more and more is having to resort to military tactics to enforce usage of their dollar.

Further complicating the problem is the fact that the FED is essentially monetizing the U.S. debt to keep interest rates low at a rate of $85B USD / month. Despite all the talk of "tapering" the FED hasn't yet slowed down on these purchases at all and even worse still they haven't prevented interest rates from rising as they've been intended to do. As Chris Martenson shows in his presentation on the collapse of the exponential function the U.S. has up until now followed with a 99% fit a perfect exponential growth curve which makes the assumption then that the future must always be greater than the past. However, starting in 2008 the amount of debt being issued to maintain growth hasn't been keeping up with this exponential curve. If the FED wasn't monetizing debt the U.S. would be even further behind the growth curve and would likely already be in a recession.

That's bad enough, but it gets worse. China is already slowly divesting from U.S. treasuries and the method in which they are doing it is by buying real assets all around the world. From the Gulf of Mexico to the oilsands in Alberta China is dropping USD 'like a boss' and in the process giving western nations back their U.S. debt while taking real assets away from them. The U.S. is surrounded by acquisitions made by China. This may in the short term relieve the U.S. of some of it's funding problems but in the long term is stripping it of the assets which provide it's tax base in revenue in the first place. We like to think that China finally came around to 'playing capitalism' with us but if you take a good look at what they're doing you'll notice that they are keeping all of their assets, and gold, to themselves. Their acquisitions are geopolitical, strategic, and their game plan is all about the long term.

To add insult to injury the continual revelations about how the U.S. and it's western allies are heavily involved with economic espionage against the BRIC nations only hasten a withdrawal of support for the U.S. dollar.

Why would an industry making billions of dollars want things to change? They don't.

Obamacare is a smokescreen for the people to focus on to facilitate the battle of "left vs right". When everything blows up each side will point at the other and say "he did it!" when in reality they both knowingly did it and use this smokescreen to divert attention and cause squabbling amongst the peasants in typical divide and conquer fashion they will have everyone arguing with each other instead of taking the culprits to task.

When you consider all of the issues I listed above what does Obamacare have to do with anything? If lawmakers "won't allow" a default to occur then why would they "allow" the uncertainty in the first place? Because the "tea party types" don't want healthcare reform? Bullshit, Obamacare isn't even healthcare reform. All it does is mandate that more public money will be going to the very private health insurers who definitely do want things to change. They authored the damn bill! Obamacare isn't a government takeover of healthcare, it's a private insurance takeover of what little public healthcare the U.S. already has.

But whether a deal is reached or not, there is no way US legislators will tank the world economy, although we may get down to the 11th hour as zealots seek to leverage fear in an effort to gain concessions.

I agree that this time, it's going to go down to the 11th hour and a stopgap will be passed then as I stated in my post yesterday however this does not mean the next time the same will hold true. The end result of this time will be worse than the end result of the last time.

For instance:

Economists at Goldman Sachs Group Inc., IHS Inc. (IHS) and BNP Paribas SA said they expect the Treasury to husband the tax money it collects to make sure it can meet interest payments on the nation’s debt. Other obligations, from salaries of government workers to payments to defense contractors, would face the ax. The result: $175 billion less in government spending during November alone, said Goldman’s Alec Phillips in Washington.

“The cutting would be so huge it would put the U.S. back into recession,” said Jim O’Neill, former chairman of Goldman Sachs Asset Management who is now a Bloomberg View columnist.

So sure, there's options to not default, but I'm not sure I would exactly call them better options. Having all your public money going to private banks, interests, and foreigners to pay interest on debt while services are cut, poverty skyrockets, which all results in a positive feedback loop of less and less revenue, more and more borrowing, more and more interest payments, and more and more debt ceiling debates.

If Obama and the democrats blink, the big winner will be the U.S. health care industry, at least in terms of their profits.

The healthcare industry is already the winner; they win either way. The politicians win either way. The banks win either way. The people lose either way. This is the major truth that sits behind the smokescreen.

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Richard Fantin is a self-taught software developer who has mostly throughout his career focused on financial applications and high frequency trading. He currently works for CenturyLink

Nazayh Zanidean is a Project Coordinator for a mid-sized construction contractor in Calgary, Alberta. He enjoys writing as a hobby on topics that include foreign policy, international human rights, security and systemic media bias.

UPDATE-1 - The Adventures of Fiscal Cliff: The Healthcare Shutdown Showdown

Oh look, here we are again. The U.S. - now living paycheque to paycheque - might not have enough cash to cover next months rent. I suspect as before with the "fiscal cliff" (which this still is, by the way) there will be a last minute stopgap measure to stop from defaulting. You could say this partial shutdown is testing the waters of default. Of the people. It's all building up to what is surely to be an interesting crescendo to mark the full transformation of the U.S. into a fascist police state when their services can't be funded all together.

Oh I know, "there's been shutdowns before". Like in 1995, right? Well the U.S. didn't have a $17T debt in 1995. Every time the "debt ceiling" of magic money comes up is the situation getting worse? or better? What happens the next time? and the next after that? When it's $20T or $30T? After the U.S. has used up the last of it's water sheds fracking everything it's got left? Or entered it's next subprime crisis of student debt? It's pretty close to inevitable that sooner or later one of these rent payments is going to be late, or non-existent.

The so-called disagreements between the parties is theater. Obamacare? Really? That's the hang up eh? Not the continuous need to raise the debt ceiling? have the FED monetize more debt? It's bullshit. This is a country that just wanted to spend countless billions bombing Syria (and did spend a considerable amount just preparing for the possibility).

This is all theater meant to keep confidence in the overall economy by leading people to believe the problems are simply diplomatic. If the Republicans would only agree to fund the government and accept Obamacare then everything would just be peachy, wouldn't it? It's not like the debt ceiling will be a problem again in a few short months, right? Right...

Do you notice how the debt problem is never a problem until it's a problem? We haven't heard anything about this since the whole fiscal cliff fiasco. It's always "down to the wire" like a kid who has been jerking off all week then crams in his studying on the day before the exam.

From this perspective, and contrary to popular opinion amongst those who have a vested interest in the "confidence of the economy", it is almost certain the U.S. will default on it's debt sooner or later. That's what Boston was preparation for. That's what this multi-year mind game is building up to. That's why the department of Homeland Security is so interested in "domestic terrorists". As things get worse, people are going to get angry.

Of course, my outlook throughout all of this time has been that the U.S. dollar would eventually collapse and my outlooks on Canada always take this into consideration. Unlike the IMF:

The IMF linked Canada's growth prospects directly to the U.S. recovery, which it says will strengthen exports and business investment as domestic consumption cools. The forecasts assume the U.S. government shutdown is short-lived and the U.S. debt ceiling is raised promptly.

Oh, well that makes sense why the usually debt conscious and pro-austerity backed with police-state IMF is calling for a "swift hike" in the U.S. debt ceiling. I guess debt isn't a concern when the debtor is your primary source of funding especially when the IMF itself is just a tool for taking over economies. One hand washes the other.

But hey, that's the "free market" for ya, isn't it? A free market where it's more important who is the head of the FED so the odds of continual monetization of debt appear favorable rather than whether an entire generation can actually afford a home.

Fascist economies of corruption of course just are not limited to the U.S. either, now are they Canada? Recently revealed is the fact that CSEC is essentially in the pockets of Canada's energy business. So let's see, CSEC consults with energy firms while CSIS spies on energy activists. National security is energy security, and energy security is economic security. Therefore national security is economic security and the breeding ground of fascist "private/public" partnerships. When Alison Redford goes to the U.S. to lobby "on behalf" of Alberta's China's energy industry you are seeing the new purpose of government in action.

Governments now are relegated to managing public perception of the industries they are working on behalf of and managing the ever diminishing funds in the public coffers in accordance with the wishes of international lenders, bankers, and markets. If the central bankers are the ying of the "free market" then government management of public perception is the yang. Just look at the Alberta and Canadian government's close relationship with CAPP. Look at how many times they've used taxpayer money to fund propaganda campaigns that benefit CAPP. The government in terms of it's view of industry should be neutral, equally split between the needs of the people and the needs of industry yet the reality is the government is completely biased towards industry and is willing to lie to the people and cover up industry mistakes. The Japanese government and Fukushima provides a glaring example.

In conclusion, the confidence game is in full swing. Talk of "the recovery" still continues 5 years on even though everyone should know who are the only ones benefiting and talk of democracy is economic theater used to redirect blame for the planned destruction and transformation into what's known as the New World Order.

Update-1

Environment minister defends officials in oilsands case

But McQueen said the Pembina Institute’s ability to take the case to court — and win — shows that the system works.

“What’s important is that we have a process that allows for people, if they don’t like decisions, to really be able to appeal,” she said.

But Jennifer Grant, Pembina’s oilsands program director, said there was little in the court’s judgment “that instils confidence in the system at all,” noting Marceau found the government broke its own rules.

“This case proved you have to actually appeal decisions, take the government of Alberta to court, to expose such illegal actions or ... application of bias,” she said.

Bias in favour of industry? You don't say... Good thing the courts are accessible to the peasants, err wait...

Access to justice in Canada is being described as "abysmal" in a new report from the Canadian Bar Association, which also calls for much more than "quick fix" solutions. 

But here's my favorite part:

Premier Alison Redford also strongly defended the government’s actions last week, saying it was the province’s prerogative to determine who had standing in oilsands reviews.

“It is incredibly irresponsible and I think they’re trapped in an extremely ineffective strategy of damage control,” said Notley.

Gee, I wonder what the "province's prerogative" would be? Well here's a hint.

Edit: Just some updates with regards to clarity of CSIS/CSEC. At least in the U.S. their agencies start with different letters :/

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Thanks to Peter Cook from the comments section.

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Click here to recommend this post on progressivebloggers.ca and help other people find this information.

Richard Fantin is a self-taught software developer who has mostly throughout his career focused on financial applications and high frequency trading. He currently works for CenturyLink

Nazayh Zanidean is a Project Coordinator for a mid-sized construction contractor in Calgary, Alberta. He enjoys writing as a hobby on topics that include foreign policy, international human rights, security and systemic media bias.